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Pension Schemes In India

Published On Feb 25, 2022 10:20 AM By InsuranceDekho

So, what are exactly pension schemes? Pension plans or schemes are another name for retirement programmes. Individuals can contribute a part of their income to the allotted plans. Due to growing inflation, investing in these plans has become essential. As a consequence, even when a person has a big savings account, a pension plan may be required.
Typically, savings are intended to meet unforeseen costs. As a consequence, contributing to a pension scheme will assist a person after all other forms of funds have dried up. In India, there are two stages to pension plans: accumulation and vesting. Annual premiums are paid by owners in the former till they hit retirement age. The vesting stage, also known as the post-retirement stage, begins once an insured person has achieved retirement age. At this stage in the pension plan, the retirees will start receiving annuities till their mortality or even the demise of their nominee. To get to understand more about the different pension schemes in India, read on.

Pension Schemes In India

Different Types Of Pension Schemes In India

Following are some of the different types of pensions schemes in India that an individual can choose from -

1. National Pension Scheme (NPS)

The Indian government established a pension scheme in 2004 for anyone who sought to raise their pension amount. Individuals' investments are made there in debt and equity markets based on their choices. It lets a person take 60 percent of their salary when they retire, with the remaining 40% going forward toward annuity plan purchase.

2. Deferred Annuity

A delayed annuity plan allows an individual to establish a fund by spending a penny payment or repeating payments over the policy duration. The pension begins whenever the policy period ends. So because investment made is not taxable until it is taken, this deferred annuity plan offers tax benefits. This plan is available as a regular gift or a yet another payment. This strategy works for anyone who wants to invest all of their money at once and then in little increments.

3. Pension Funds

Six organisations have been allowed to function as fund managers by the Pension Fund Regulatory and Development Authority (PFRDA), a government organisation. As these programmes develop and are in force for a longer length of time, they generate a better rate of return.

4. Immediate Annuity

In this type of scheme, the pension begins immediately. When an insured person deposits a lump sum payment, their pension begins. The total investment by an insured person determines this. An individual can choose from a range of annuity options. The Income Tax Act of 1961 exempts premiums for immediate annuity plans from taxation. Following the insured person's death, the money is distributed to the nominee.

5. Guaranteed Period Annuity

This annuity is available for 5, 10, 15, or 20 years, irrespective as to whether the owner completes the term.

6. Annuity Certain

Here under the arrangement, the annuitant receives an income for a set number of years. This duration period is chosen by the annuitant, and the annuity is delivered to the beneficiaries in the case of their demise.

7. Life Annuity

The retiree receives an annuity again for the rest of its life under these schemes. The pension payout is sent to the spouse if the annuitant passes as well as the choice 'with spouse' is chosen.


Retirement is defined as "withdrawing from one's job or vocation, either from active working life." As a result, in order to have a stress-free retirement, one must properly prepare their future. Financial independence is the objective of retirement planning, which may be achieved through investing in a thorough pension plan. Pension plans help people secure their financial futures and enjoy a stressful retirement.

Also read- National Pension Scheme Vs Atal Pension Yojana

How Much Retirement Corpus Do I Require?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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